Ethereum Price Surges Amid ETF Approval Rumors: What It Means for the Options Market

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Today, Ethereum’s price reached a two-month high of $3,700, fueled by speculation that a spot Ethereum exchange-traded fund (ETF) might be approved soon. This surge comes after Eric Balchunas, a senior analyst at Bloomberg, increased the likelihood of the ETF’s approval from 25% to 75%.

Ethereum Price Surges Amid ETF Approval Rumors: What It Means for the Options Market

Balchunas believes the U.S. Securities and Exchange Commission (SEC) is under political pressure to approve the ETF, despite previously showing little interest in engaging with ETF applications. Reports suggest that the SEC has asked major exchanges like the NYSE and Nasdaq to update their filings, although there’s no official confirmation yet. Nate Geraci, co-founder of the ETF Institute, pointed out that the SEC’s final decision is still pending, and the approval process might extend beyond the upcoming deadline for VanEck’s Ethereum spot ETF request.

The rumor of the ETF approval has had a significant impact on Ethereum’s options market. On May 24, Ether options open interest at Deribit, a leading derivatives exchange, was recorded at $867 million, while for May 31, it surged to $3.22 billion. This indicates heightened activity and interest among traders.

The majority of these options are call (buy) options, showing a bullish sentiment among traders. If Ethereum’s price stays above $3,600 by May 24, most of the put (sell) options will become worthless, and call option holders will profit significantly. This could result in a $397 million advantage for call options if Ether remains above $3,600 at the weekly expiry.

Looking ahead to the monthly expiry on May 31, the stakes are even higher. If Ethereum’s price exceeds $3,600, 97% of the put options will be worthless, strongly favoring call options. For example, if Ethereum reaches $4,550 by the end of the month, the net open interest will favor call options by $1.92 billion.

The recent 18% price jump in Ethereum has taken many traders by surprise, benefiting those with bullish strategies. These profits are likely to be reinvested, potentially keeping Ethereum’s price momentum positive after the options expiry.

In summary, the potential approval of a spot Ethereum ETF has sparked significant interest and optimism in the market, leading to a substantial rise in Ethereum’s price and a favorable outlook for bullish traders in the options market. This development highlights the dynamic nature of cryptocurrency trading and the significant impact of regulatory news on market movements.

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Ken Wells